June 12, 2014 | ISSUE 373

Western Real Estate Business E-Newsletter
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Emerald Fund Receives $58.8M 
for San Francisco Apartment Project
The 101 Polk Apartments project will reside near major tech companies like Twitter, Dolby Laboratories, Yammer and Zoosk.

SAN FRANCISCO -- Emerald Fund has received a $58.8 million FHA section 221(d)(4) mortgage for the 101 Polk Apartments project in Downtown San Francisco. The community will be located on its namesake, 101 Polk St., in the Civic Center/Mid-Market District. 


The area features notable tech companies, including Twitter, Dolby Laboratories, Yammer and Zoosk. The new project will contain 162 Class A units, including 19 affordable residencies. 


RED Mortgage Capital LLC, the mortgage banking arm of RED Capital Group, provided the loan. 


"The city of San Francisco is a challenging market for new construction due to its onerous entitlement, plan review and development approval process," says Rick Andrews of RED Mortgage Capital. "[But] we were able to help Emerald Fund Inc. navigate the loan process to a smooth finish."

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Universal Music Group Leases Space
at LNR Warner Center in Woodland Hills

Universal Music Group will consolidate its two existing Woodland Hills offices once it relocates to LNR Warner Center this February.

LOS ANGELES -- Universal Music Group (UMG) has leased 146,636 square feet at LNR Warner Center in the Los Angeles submarket of Woodland Hills. The seven-building campus is located at 21301 Burbank Blvd. The 10-year lease is estimated at a reported $46 million. 


UMG will occupy the top four floors of the five-story building. This is the largest relocation lease by square footage in the San Fernando Valley so far this year, according to CBRE, which represented UMG. 


The music company plans to consolidate its two existing Woodland Hills offices. The new lease will commence this February. UMG's Santa Monica offices will not be affected by the relocation. 


CBRE's Paul Stockwell, Josh Leibowitz and Jeremy Charles represented UMG. Hines was represented in-house by Todd Later and Eric Lyon. 


"We are very pleased to unite all of our Woodland Hills employees in one location, which will help to further the kind of creative collaboration for which Universal Music Group is known," says Boyd Muir, UMG's executive vice president and CFO. "We are delighted that this innovative working environment is located in one of the most dynamic, emerging parts of Los Angeles -- and one that we have come to know well over the years."

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Prana Apartment Homes in Lafayette Receives $34.5M Refinance

Prana Apartment Homes sits adjacent to the Exempla Good Samaritan Medical Center and Kaiser's Rock Creek Medical Offices in southeastern Boulder County.

LAFAYETTE, COLO. -- The 254-unit Prana Apartment Homes in Lafayette has received a $34.5 million refinance. The community is located at 550 Viridian Drive. It sits adjacent to the Exempla Good Samaritan Medical Center and Kaiser's Rock Creek Medical Offices in southeastern Boulder County. 


The funds will be used to replace a HUD loan that had a much higher interest rate. That loan was closed to prepayment until last month. The new 10-year loan features a fixed interest rate of 4.74 percent. It also contains five years of interest-only amortization and some cash-out proceeds above the existing loan balance. 


HFF's Josh Simon, Eric Tupler and Chad Murray secured the new Fannie Mae loan on behalf of the borrower, LLJ Stratford Prana LLC. 


"The borrower executed their business plan to perfection with this refinance," says Simon. "It bought the property in December 2012 at a great price with the plan to put more accretive financing in place once the assumable HUD loan opened to prepayment. Not only did it lower its borrowing costs with this refinance, but it was able to return some of its equity as part of this financing."

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Pinnacle Queen Creek in Chandler 

Sells for $33.3M

The 252-unit Pinnacle Queen Creek apartment complex in Chandler was built in 1999.

CHANDLER, ARIZ. -- Oregon Pacific Investment & Development Co. has acquired the 252-unit Pinnacle Queen Creek apartment complex in Chandler for $33.3 million. The community is located at 800 W. Queen Creek Road. It was built in 1999. 


David Fogler and Steven Nicoluzakis of Cassidy Turley represented the seller, Pinnacle at Queen Creek LLC, which Northwestern Mutual Life Insurance Co. and Essex Property Trust control. 


"Pinnacle Queen Creek is a best-in-class example of a suburban multifamily community in one of the Valley's top submarkets," says Fogler. "Its proximity to major employers and amenities, along with its exceptional design and amenities, made it a highly desirable acquisition for an investor."

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Berkadia Arranges $33.2M Acquisition Loan
for The Alexander at South Virginia in Reno

RPM Co. received a $33.2 million loan to acquire The Alexander at South Virginia, a 350-unit apartment complex in Reno.

RENO, NEV. -- Berkadia Commercial Mortgage has arranged a $33.2 million acquisition loan for The Alexander at South Virginia, a 350-unit apartment complex in Reno. The community is located at 11380 S. Virginia St. The asset is currently 96 percent occupied. 


The borrower, RPM Co., used the 10-year, fixed-rate permanent financing to acquire the property. David Bleiweiss and Anthony Ansevin of Berkadia Commercial Mortgage's Orange County office arranged the full-term, interest-only loan through Freddie Mac.   

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Vista Lane Apartments in Chula Vista Sells for $19.4M

Vista Lanes Apartments is located near Broadway, the area's dominant retail corridor.

SAN DIEGO -- The 150-unit Vista Lane Apartments in the San Diego submarket of Chula Vista has sold to the Conrad Prebys Trust for $19.4 million. The community is located at 1440 Second Ave. near Broadway, the area's dominant retail corridor. 


Christopher Zorbas of Marcus & Millichap's San Diego office represented both the buyer and the seller, the Kreutzkamp Revocable 2000 Trust, in this transaction. 


"Vista Lane Apartments is a stable, well-maintained, garden-style apartment complex with considerable value-add potential," says Zorbas. "The property's strong location in an area with limited sites available for new multifamily construction creates a clear opportunity to enhance revenue with the implementation of a proven value-add strategy."

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'Unremarkable Performance' of U.S. Labor Market Continued in May, Says Bach

RENTON, WASH. -- The U.S. labor market has been remarkably consistent in its unremarkable performance, observes Robert Bach, director of research for the Americas with Newmark Grubb Knight Frank, following last Friday's announcement by the Bureau of Labor Statistics (BLS) that total nonfarm payroll employment rose by 217,000 in May. 


"Growth has been strong enough to chip away at the slack in the supply of labor, but not strong enough to reverse the cautious psychology that persists among households and some businesses," wrote Bach in a June 6 research note titled "Back in the Black." 


With the 217,000 net new payroll jobs created in May, the U.S. labor market finally recovered all of the 8.7 million jobs lost to the Great Recession. The national unemployment rate remained unchanged at 6.3 percent, the lowest level since September 2008. 


"A welcome milestone, it is also a sobering reminder that the labor force has grown by 1.7 million workers since the recession began with virtually no new jobs created for them to fill, which has kept the unemployment rate above the long-term equilibrium rate of 5.5 percent," said Bach. "These totals do not count millions more who have dropped out of the labor force because they can't find work." 


The good news for commercial real estate, according to Bach, is that the leasing markets continue to recover and rents are rising, albeit at a slow pace. Meanwhile, the low interest rates are expected to continue to fuel investment activity. 


May marked the fourth consecutive month that employers added more than 200,000 jobs. The BLS also revised total jobs gains in April from 288,000 to 282,000, 6,000 lower than originally reported. The March total was unchanged at 203,000. 


Among the job growth highlights for May: 


* The three primary office-using sectors -- information, finance, and professional and business services -- added a combined 53,000 jobs, on par with the six-month average of 53,800. Bach expects the gradual recovery in the office leasing market to continue. 


* Employment sectors related to demand for industrial space -- manufacturing, transportation and warehousing, and wholesale trade -- added 36,300 jobs. Most commercial real estate experts expect the industrial vacancy rate, which has returned to its pre-recession level, to fall further in coming quarters. 


* Leisure and hospitality added 39,000 jobs, up from the six-month average of 28,300, signaling an extremely healthy lodging industry. 


* Retailers added 12,500 jobs, down from the six-month average of 19,900. Retail employment remains 257,000 short of its pre-recession peak, a sign of the ever-growing shift of sales onto the internet, Bach points out. 


* Education and health services added 63,000 jobs in May, of which 33,600 were in the healthcare subsector, reflecting demand for medical office buildings and related facilities. This is more than double the six-month average of 15,900 new healthcare jobs, a sign that providers are expanding to serve newly insured customers. 


* Construction added a modest 6,000 jobs while government added 1,000 jobs.


Click here to read the rest of Scott Reid's story.

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